Interest rates were fixed for a cup of coffee — and a $2.5 billion fine

The cost of fixing interest rates was a cup of coffee — and $2.5 billion.

That is one way to look at the record settlement paid by Deutsche Bank for fixing interest rates, to a combination of federal, state and British authorities. Combined with the roughly $1 billion it had already paid to European Union authorities, and Deutsche Bank has paid $3.5 billion for fixing rates.

Deutsche Bank
DB, -0.12%
, like other firms including UBS
UBS, -0.60%
, Citigroup
C, +0.14%
and J.P. Morgan Chase
JPM, -0.45%
, was fined over allegations it manipulated a key daily interest rate, called the London interbank offered rate, to benefit traders either internally or at other banks or fund managers.

According to the order from the New York State Department of Financial Services, the quid pro quo for manipulating rates wasn’t particularly steep. A message from Deutsche’s head of the London money market derivatives desk, from 2006, read: “Push for 60… or even 58 if u can… Coffee on me.”

Most of the time, the messages showed they were just favors, with the comments littered with references to “mate,” “dude,” “pal,” and uniquely, “old bean.”

There was a clear awareness of what was going on. Here’s what a vice president wrote in a message about the Tokyo interbank offered rate, or Tibor.

“It is not because all the tibors setters are corrupt/manipulators that deutsche bank has to be aswell… It is not because the japanese banks are manipulating the tibor fixing that DB has to do it as well… Tibor is a corrupt fixing and DB is part of it!”

Deutsche Bank says it has disciplined or dismissed the individuals involved and “significantly” strengthened its controls. The bank says it now has 200 employees dedicated to electronic discovery so that it can better collect and produce documents and audio.

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